Protecting your assets through insurance

Protection is what insurance mainly gives clients. Knowing that the future cannot be completely certain for anybody, insurance, in its various ways of protecting one’s hard-earned assets, can give clients and their families peace of mind when illness, accidents, disruptions, or untimely passing comes.

Life insurance, for instance, is considered as “a means of providing an instant estate for survivors.” For Edward J. Metzen, a former chair of the current Department of Personal Financial Planning in the University of Missouri (UM), this benefit life insurance provides shows how much it prioritizes protection for clients.

“When buying life insurance, your primary concern should be providing adequate protection; the possible savings feature is a secondary consideration,” Mr. Metzen advised in a guide to insurance on UM’s website.

Such protection is not limited, nonetheless, to providing income to an insured’s dependents. Insurance can, in fact, prevent them from having to give off assets. This is what is often referred to as estate preservation.

Before the ownership of one’s assets can be transferred to another, an estate tax should be given to the government. The amount of this tax, however, might surprise survivors that they might even consider selling off some, if not all, of those assets just to pay the tax. Add to that unsettled debts and the burden expands.

Life insurance can prevent survivors from bearing this burden by using the premium to pay for taxes and unsettled debts.

“Life insurance can potentially cover whatever is due to the government so your loved ones don’t have to make difficult decisions,” local financial literacy platform Pesolab wrote.

Aside from estate preservation, life insurance is also considered an efficient way of estate creation. In addition to the aforementioned ‘instant estate,’ life insurance can also help equitably transfer wealth to later generations.

Shares of a family business, for instance, can be distributed to all members instead of solely to family members who are active in that business.

“Often, the business is the estate’s major asset and the amount remaining for family members who are not involved in the business is significantly less. Life insurance can provide a lump sum to the family members who do not have an interest in the business, to ensure a fair inheritance,” US-based wealth management service TD Wealth wrote in a document on life insurance’s role in asset protection.

Another way estate is created and protected through life insurance involves annuity, which provides investors with a guaranteed regular income stream while consequently facilitating the creation of an estate.

“Usually, a portion of the annuity income is used to pay the premiums for a life insurance policy with a face value (insurance benefit) equal to the amount of the annuity principal,” TD Wealth explained. “Upon death of the annuitant, the tax-free life insurance death benefit is paid to the annuitant’s beneficiary(ies) to replace the capital originally invested in the annuity.”

Furthermore, there are other types of insurance tailored to protect certain assets.

Property insurance is designed to protect an insured’s house, whether owned or rented, as well as other items he or she owns. In cases of natural calamities, theft, or fire, among other uncertainties, this kind of insurance should at least cover most of the replacement costs. It can also protect the owner/renter against personal liability if someone is injured at that property.

“Without property cover, you absorb all the risks in acquiring these assets. If you have adequate cover, however, you can rest easy knowing your insurer will pay you a lump sum benefit when your properties are caught in a natural disaster or a man-made accident,” Pesolab noted.

Auto insurance, meanwhile, covers the replacement of vehicles in case of accidents. Beyond that, auto insurance also provides coverage for liabilities (if the driver is the offending party) as well as medical-related expenses. Another financial platform, Grit.ph, in its guide to car insurance, finely stressed the importance of such policy: “It’s ‘protection for your pockets’ against car-related damages or accidents.”

Businesses are also not exempted from uncertainties, more so at present; so a policy designed for them will greatly help. Business insurance protects businesses from potential losses by providing coverage for their financial assets as well as intellectual and physical properties from lawsuits, property damage, theft, loss of income, and employee injuries and illnesses.

Business insurance comes in several forms. One of these is the business owner’s policy, which covers damage to property and even business interruption. Workers’ compensation insurance, meanwhile, covers medical and health bills of employees in case of workplace accident.

Group life insurance, or employee benefits package, is collectively provided by businesses to their employees; while data breach/cyber liability insurance can be used to protect businesses from costs resulting in digital attacks.

Assets, in their various forms, should regularly be appreciated and taken care of, and various insurance products in the market are capable of helping consumers become better stewards of their assets and themselves. — Adrian Paul B. Conoza